Correlation Between MHP Hotel and United Rentals

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Can any of the company-specific risk be diversified away by investing in both MHP Hotel and United Rentals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MHP Hotel and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MHP Hotel AG and United Rentals, you can compare the effects of market volatilities on MHP Hotel and United Rentals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MHP Hotel with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of MHP Hotel and United Rentals.

Diversification Opportunities for MHP Hotel and United Rentals

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between MHP and United is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding MHP Hotel AG and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and MHP Hotel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MHP Hotel AG are associated (or correlated) with United Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of MHP Hotel i.e., MHP Hotel and United Rentals go up and down completely randomly.

Pair Corralation between MHP Hotel and United Rentals

Assuming the 90 days trading horizon MHP Hotel AG is expected to generate 0.97 times more return on investment than United Rentals. However, MHP Hotel AG is 1.03 times less risky than United Rentals. It trades about 0.06 of its potential returns per unit of risk. United Rentals is currently generating about 0.05 per unit of risk. If you would invest  116.00  in MHP Hotel AG on August 25, 2024 and sell it today you would earn a total of  4.00  from holding MHP Hotel AG or generate 3.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

MHP Hotel AG  vs.  United Rentals

 Performance 
       Timeline  
MHP Hotel AG 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in MHP Hotel AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, MHP Hotel may actually be approaching a critical reversion point that can send shares even higher in December 2024.
United Rentals 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Rentals reported solid returns over the last few months and may actually be approaching a breakup point.

MHP Hotel and United Rentals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MHP Hotel and United Rentals

The main advantage of trading using opposite MHP Hotel and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MHP Hotel position performs unexpectedly, United Rentals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in United Rentals will offset losses from the drop in United Rentals' long position.
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The idea behind MHP Hotel AG and United Rentals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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